Ecombd

Monday, May 12, 2008

At the face of the appreciating of yen and rising cost of fuel, Japan’s stock market observed a decline in the stock price. Last week, Toyota Motor Corporation (TYO:7203) forecasted its first profit decline in seven years. Same thing is happening to other auto companies as well. Japan’s second largest brokerage firm, Daiwa Securities Group Inc.(TYO:8601) saw the biggest slump in a month. According to Daiwa’s fund manager, Masayuki Kubota, a small move in the yen would shake the stock market. Bloomberg reports:

The Nikkei 225 Stock Average dropped 23.30, or 0.2 percent, to 13,632.04 as of the 11 a.m. break in Tokyo, while the broader Topix index fell 9.87, or 0.7 percent, to 1,331.89. Twenty-three of the 33 industry groups on the Topix declined.

The yen has advanced 16 percent against the dollar in the past year and strengthened to as much as 102.57 today from 103.45 at the close of stock trading on May 9 in Tokyo. A 1 yen gain against the dollar and euro cuts Toyota's annual operating profit by 40 billion yen ($389 million) and 6 billion yen respectively, according to the automaker.

Meanwhile, crude prices rose 1.8 percent to a new record of $125.96 a barrel on May 9, extending their gain to a sixth day.

The weakness of the domestic economy and rising cost has affected the profitability of the Japanese companies. Economists believe that Japanese economy will not be stable until mid 2009. Rising price of materials will hurt the company profits.